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Friday, June 10, 2011

The much-awaited meeting of the Empowered Group of Ministers (EGoM) on fuel prices, which was to take place on June 9, was cancelled, according to media reports. The EGoM on fuel prices was expected to announce an increase in diesel and LPG prices. However, with the international oil prices having moderated in recent days it will be interesting to see how much is the eventual hike in diesel and LPG prices. The state-run oil marketing companies (OMCs) on May 14th hiked petrol prices by Rs. 5 per litre. Petrol was de-regulated in June last year but the other petroleum products like diesel, LPG and kerosene are yet to be made market linked. Separately, media reports said that the Government could restore the share of the upstream oil & gas companies in the annual subsidy to 33%. It may be recalled that just recently, the overall oil subsidy payout for the public sector upstream companies was hiked to 38.7% for the fiscal year ended March 2011.

The annual rate of inflation in the food space increased in the fourth week of May and climbed back above the 9% mark, data released by the Government showed. Inflation in the Fuel & Power space inched lower during the week under review, the data revealed. Annual inflation in the Food Articles space rose to 9.01% in the week ended May 28 from 8.06% in the previous week, the Commerce & Industry Ministry said in a statement. With this, food inflation has remained under the much-dreaded double digit mark for the 11th straight week. Food inflation was at 20.62% in the year-ago period.

As anticipated, the Indian market remained lackluster throughout the week with the Sensex and the Nifty losing about 0.5% each. Trading volumes have decelerated, underling the lack of conviction among both, traders and long-term investors.

There is no major catalyst on the horizon that can change the course of the market direction. The UPA II is happy postponing critical policy decisions amid macro-economic challenges like high inflation, industrial slowdown and hardening interest rates. In the meantime, the RBI will continue to do its bit by jacking up rates by another 25 bps. It will be interesting to analyse the tone of the RBI's policy statement on June 16 for possible hints on its stance in the coming months.

India's industrial output, as measured by the all-India Index of Industrial Production (IIP) stood grew by 6.3% in April 2011 as per the new series, the Central Statistics Office (CSO) said on Friday. This is lower as compared to the 8.8% expansion in March as per the new series. Industrial output grew by a modest 4.4% in April this year versus 7.3% in March 2011 as per the old series, the CSO said.

The annual growth rate in IIP for the period April-March 2010-11 stood at 8.2% over the corresponding period of the previous year as per the new series. Industrial production rose by just 5.3% in the previous financial year (2009-10).

Data on advance tax for the first installment, the Reserve Bank of India's mid-quarter monetary policy review and progress of the monsoon rains will determine the near-term trend on the bourses, which have been range bound off late. Investors will eye the first installment of advance tax from Indian firms due on 15 June 2011, which could provide a cue on Q1 June 2011 corporate earnings.

The key benchmark indices reversed direction after registering gains at the onset of the week ended Friday, 10 June 2011, as world stocks fell. Caution prevailed as the Reserve Bank of India (RBI) is seen raising its key lending rate by 25 basis points at its mid-quarter monetary policy review on 16 June 2011 to tame inflation. Political worries also weighed on the market following reports the DMK may opt to withdraw ministers from the Cabinet after a high-level party meeting in Chennai on Friday, 10 June 2011.

The key benchmark indices reached their lowest closing level in nearly two weeks on political worries following reports the DMK may opt to withdraw ministers from the Cabinet after a high-level party meeting in Chennai today, 10 June 2011. Caution prevailed as the Reserve Bank of India (RBI) is seen raising its key lending rate by 25 basis points at its mid-quarter monetary policy review on 16 June 2011 to tame inflation. The BSE Sensex lost 116.36 points or 0.63%, up close to 85 points from the day's low and off close to 130 points from the day's high.

Precious metals ended higher on Thursday, 09 June, 2011 at Comex. Prices rose due to inflationary pressures following comments from European Central Bank President Jean-Claude Trichet. The dollar turned strong later in the day paring earlier losses.

Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies and also vice versa. But bullion metals have registered increase in prices despite strong dollar in recent times and vice versa.

Crude oil prices shot up on Thursday, 09 June 2011 at Nymex. Prices rose as OPEC members decided to keep their production quota unchanged at their latest meeting at Vienna a day before on Wednesday. Prices also dropped following the weekly inventory report which showed a decline of crude inventories for last week.

The Indian indices are likely to begin the trade with some gains led by supportive global cues. IIP data for April will be in focus

Headlines for the day:

FinMin to pare growth forecast to 8.75%

Maruti strike threatens to engulf Manesar auto hub

BSE allows trading in 135 more stocks in F&O

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Events for the day:

Major corporate action

IIP data for April 2011 to be announced todayEx-date for final dividend of Birla Corporation, Dhanlaxmi BankEx-date for dividend of ITC, Bata IndiaFor more events and news, log on to Sharekhan.com

Pre-market report

Indian indices

The Indian markets have been directionless over the past few sessions as it seemed to be waiting for some trigger on the either side. The markets have remained locked in a very narrow range and may continue its see-saw trend until any improvement is seen in the sentiment. One should wait for the markets to break out of the current range.

Today the markets are expected to witness a bounce in the opening trade with the help of good global cues. Investors will be eyeing Index of Industrial Production ( IIP) numbers for the month of April 2011 slated to be released today, which could be a trigger for the markets. IIP growth is seen at 5.1% in April and is likely to be seasonally softer and may indicate slowdown.

Daily trend of FII/MF investment in equities

The FIIs have purchased Indian stocks to the tune of Rs174.80 crore on June 09, 2011 as compared to net buy of Rs36.30 crore on June 08, 2011. The domestic investors have bought Indian shares worth a net of Rs21.50 crore on June 08, 2011.

Global signals

The European shares rose sharply on Thursday (June 09, 2011), bouncing from six days of losses as investors snapped up beaten-down stocks, notably those related to commodities.

The Wall Street ended higher for the first time in over a week on Thursday, with the Dow and the S&P 500 rising 1% at one point, but many analysts saw the rebound as short-lived.

All the Asian stocks were mixed in trade on Friday (June 10, 2011). SGX Nifty was trading mere four points lower.

Commodity cues

Crude oil increased to a one-week high on Thursday after OPEC’s failure to reach an accord on output targets for the first time in at least 20 years.

The Indian stock market finished almost unchanged on Thursday at the end of another dull trading session. Cues from the international markets were not that encouraging to start with. The Asian markets closed mostly lower with the Chinese market among the worst hit. The European markets were subdued ahead of the policy decisions in the UK and eurozone.

As far as the domestic economy is concerned, the Government's weekly inflation numbers showed a spike in food inflation to 9% in the fourth week of May. But, the data didn't have much of a bearing on the mood. Investors will now closely study Friday's IIP report for the month of April.

Winners make a habit of manufacturing their own positive expectations in advance of the event. - Brian Tracy.

An improvement in consumer confidence has come as a welcome relief for the US markets which have been struggling off late. In India, the indices may continue to remain lackluster amid thin volumes. A clear direction might emerge once the Nifty manages a decisive break out from the current range.

There has been a lull in the market over the past few days, with the key indices hovering in a narrow trading band. Traded volumes have tapered off substantially, reflecting a general lack of interest among market players. This lackluster trend may persist for a while before there is any material improvement in the sentiment.

``Another area of concern is tepid FII inflows, which have eased off in the past few days. One must avoid taking large bets and market-wide call at this juncture and wait for the market to break out of the current range. Stick to a stock specific action but beware of companies with dodgy background,`` said Amar Ambani, Head of Research - IIFL.